Since September 2021, the Nifty index has surged nearly 40% in rupee terms. Yet, for investors tracking performance in dollars, the story is starkly different—returns have been flat. The culprit is the rupee’s steady depreciation, foreign portfolio outflows, and global oil shocks.
Currency Drag and Investor Flight
The rupee has slipped over 11% in FY25–26, its sharpest fall since FY2011–12. This currency weakness erased equity gains when converted to dollars. Adding to the pressure, foreign investors pulled out nearly ₹1.2 lakh crore in March 2024, citing stretched valuations, tax concerns, and geopolitical risks.
Oil and Capital Account Stress
High crude prices, driven by West Asia tensions, worsened India’s fiscal outlook. Meanwhile, weak FDI inflows and rising outward investments pushed the capital account into deficit, further denting investor confidence.
Oversold Market, Possible Silver Lining
Technical charts show Nifty’s RSI at its most oversold level since the Covid crash of 2020. Experts believe such phases often precede renewed foreign inflows, provided valuations ease and sentiment stabilises.
Expert Voices
DSP Netra flagged India’s capital account deficit as a warning sign. Zerodha’s Nithin Kamath noted that foreign interest has “died out” due to oil shocks, rich valuations, and rupee weakness.